ARTICLES ABOUT CREDIT RISK BY DATE - PAGE 4

Dhritiman Chakraborty NEW DELHI: Given the volatility in equity market, debt instruments provide the much needed support for risk-averse investors who are looking for stable returns in a fixed time frame. One such instrument is Non-Convertible Debenture, commonly called NCD. They (NCDs) are used as tools to raise long-term funds by companies through a public issue. To compensate for this drawback of non-convertibility, lenders are usually given a higher rate of return compared to convertible debentures.

NEW DELHI: Global agency Moody's today said weak rupee and higher borrowing costs will impact credit quality of several Indian companies especially, IOC , Tata Steel and Tata power. "Increased borrowing costs and the weak rupee will pressure the credit quality of rated Indian non-financial companies," Moody's said in a report titled 'Higher borrowing costs, weak rupee will pressure Indian corporate credit metrics'. It said interest rates in India will likely rise further amid measures by the RBI to tighten liquidity and bolster the rupee, which has fallen near historic lows against the dollar.

BEIJING: China, Asia's largest economy , might face credit losses of up to a whopping $3 trillion, an American investment banking firm has warned as the Chinese government ordered an audit of the public debt. In its report, Goldman Sachs group said that the rapid pace of China's credit expansion, increasingly sourced from the inherently more risky and less transparent "shadow banking" sector, has become a top concern for global markets. "Our Asian economists and strategists recently published a comprehensive look at this concern and its implications for economic growth and asset performance in China, calculating that an extreme upper-bound for total China credit losses could amount to 18.6 trillion yuan," the report said.

SRINAGAR: The Reserve Bank today said Islamic banking is not consistent with current banking laws in India. "We got to see that Islamic Banking which does not allow charging interest or taking of interest is inconsistent with our existing laws... All that I am saying is Islamic banking is not consistent with current banking laws," RBI Governor D Subbarao said after the board meeting here. Charging of interest is necessary to conduct banking operation in India because banks have to borrow on which it has to pay interest rate , he said, adding banks have to deposit excess cash with the Reserve Bank on which they get interest.

MUMBAI: Stock market investors may see the cost of trading coming down and get their funds from sale of shares quicker with capital markets regulator Sebi proposing to shorten the trading settlement cycle to one day after a trade from two days. Currently, if an investor buys a share on, say, Monday, the shares are credited to her demat account on Wednesday or on a T+2 basis. If Sebi's proposal is accepted, the shares will be credited on Tuesday or T+1 basis instead. The move will benefit investors who are not be able to arrange funds immediately to buy shares and who depend on their brokers to put up margins for the purchase.

MUMBAI: With an aim to safeguard investor interest in the event of default or bankruptcy of brokers, market regulator Sebi today proposed to ring fence clients' money and collaterals from such risks through steps like greater Internet-based trades and faster settlements. The proposed move, which was issued today by Sebi as a 'discussion paper' inviting public comments, might also have a bearing on sale of pledged shares by large brokers or financiers which often leads to a panic-selling in the market.

MUMBAI: The biggest casualty of tightening financial sector regulations in India last year was the securitisation industry , where banks sell down their loans that help them lend more to industry, according to experts. New RBI norms, such as minimum holding period of six months for non-banking finance companies (NBFCs) and 8% cap on the spread between base rate of the bank buying the pool and the yield charged to customer, have led to a near closing of the bilateral securitisation route for finance companies.

Definition: Gilt Funds are mutual funds that invest only in government securities. They are preferred by risk averse and conservative investors who wish to invest in the shadow of secure government bonds. Description: Since gilt funds invest only in government bonds , investors are protected from credit risk. The instruments where these funds invest have sovereign guarantee. Hence no default risk is associated with these instruments. These funds can have different maturity profiles.

MUMBAI: The Reserve Bank today postponed the implementation of Basel-III regulations for currency derivatives segment to next January pending resolution of norms regarding trade settlement, even as it said the new capital adequacy requirements will kick in from April 1. "In view of the shift in the start date of Basel III implementation, all instructions applicable as on January 1, 2013, except those relating to the credit valuation adjustment...

NEW YORK: These days, many indicators suggest we are in an extremely low-risk market environment. The Chicago Board Options Exchange Volatility Index, or VIX, sometimes known as the fear index, has reached a five-year low. European sovereign-bond yields, long a source of anxiety, have eased since their uncomfortable march higher in 2011, and the euro has risen 13% from its 2010 low. Options on currencies also suggest little fear in that market....